Friday, January 25, 2013

The Low Volatility Anomaly

By Zach Kouwe Investors these days are searching for some way to protect their assets while still participating when the stock market gains steam. Bonds are yielding nothing and people are still fearful of market declines. The common theme throughout history has been that more risk equals more reward. But study after study has actually shown that low beta stocks (those that have less volatility and are hence less risky) actually outperform over time. Some have tried to explain why the anomaly exists. Old Mutual Asset Management (a client of the PR firm I work for) is out with a new white paper describing how low volatility strategies can be applied to 401k retirement account and target date funds.

Target Date Solutions and Low Volatility Strategies by Zach Kouwe

Wednesday, January 16, 2013

Investment Strategies Require You Stick With Them

There are a lot of different investment philosophies out there all competing for the attention of a limited amount of capital. The interesting thing in my mind is that there are so many different managers, strategies, fee structures and just as many investors out there ready to listen to them, including me. These days, with bonds yielding nothing and equities still very volatile, investors (especially retirees) don't know what to do with their money. 
Mebane Faber of Cambria Investment Management (Full Disclosure: Cambria is a client of the PR firm I work for) has devised very interesting ways to diversify by investing in several different asset classes including real estate, commodities and foreign stocks, which are trading at historic low valuations. Overlay a risk management process that tries to avoid massive drawdowns by going into cash when asset prices are going down. Cambria just published its latest outlook on the market and compared returns over the last 40 years in various different portfolios. Like anything else, it relies on investors who don't do stupid things, like pull their money out of strategy just because it doesn't beat the overall market. Cambria's strategy didn't do well compared to the U.S. equity markets in 2011 and 2012, but over the long term it has been better with much less volatility. It all depends on how long you stick with the strategy.  

Sunday, January 13, 2013

Hacks and Flacks - The Financial Follies 2012

Mary Kate Dubuss, Zach Kouwe and Stephanie Dressler of Dukas Public Relations
The Financial Follies, which is put on by the New York Financial Writers Association every November, is a tremendous place for public relations folks and journalists to get to know each other better. Every time I go, I get to know someone interesting I didn't know before and meet someone I had only dealt with over the phone. 

Oaktree Sees a Bubble Brewing in the Debt Market

By Zach Kouwe

The always interesting Howard Marks of Oaktree Capital Management shares his latest thoughts on where we are in the market today. Hint: He is seeing a huge bubble brewing in the debt markets as investors reach for yield in junk bonds and accept larger risks in Treasuries. Marks is one of my favorite investment managers, primarily because he started a firm that invests in all sorts of complex financial instruments and works on behalf of large, sophisticated investors such as pension funds, but still finds a way to explain his thoughts in a way that can be easily understood by people with little background in finance. 

Marks' public relations skills have enabled him to become a leading voice in the investment community. All he has to do now is get on social media and he can raise his profile even more. Sally Krawcheck, formerly of Merrill Lynch, has done this successfully as I mention in RIABiz. Thought leadership pieces like this one below are important for any company, no matter what industry, to demonstrate to the public their unique philosophies and position in the market.